Once thought as a ubiquitous mode of doing future retail business, a replacement for brick mortar shop is today struggling to keep its foot steady on shaky grounds. E-commerce is a fight to death game where entire world’s fighter gather in one place and fight continues wjthout an end, at anytime there is only one winner who would face new fighter who keep coming, all others are loser.
It has become very difficult to define “successful” in e-commerce, in ordinary sense if I sell something, I immediately make profit because I dont like to sell anything at loss, although there is maybe some fixed cost but it will pay off in future because every unit is sold at profit. But case is not as simple with e-commerce, there is fixed cost as well as very high variable cost, goods are sold and delivered at loss just to make brand popular. Generally an e-commerce entity become profitable after a decade provided it has survived.
Only one or two survive and become large corporations, when they sit on huge cash, things become easy, viable ways exist to edge out competition and challenge from new entrants. Most company use a single tactic “acquisition”. Buy them early, buy them small before they become a challenge or rely on aggressige discount campaign just to steer away customers from competitor.
Internet eliminated the distance limitation and the “area of influence” existed in earlier brick mortar industry is no more, gone are the possibility where everyone could earn their bread and butter. The same strength of e-commerce is also the enemy of itself, at anytime only one winner can exist, either you are growing or drawning — panic haunts all the time everyone from startup to biggies. Situation is not good for vendors either who operate within an e-commerce platform because only one with lowest price listing will be sold. Thanks to awesome search and filter options on these sites, feature is killing the business.
E-commerce business heavily rely on investment and VC fundings, they keep working on expansion plans, so never a day comes when they have any profit all income is reinvested in marketing and expansion.
Most challenging thing is to acquire loyal customer for which they heavily rely on discount all the time, try to ship items at loss and all that money come from VC backing, if cash inflow is stopped anytime, e-commerce company dies almost immediately, as long they operate keep losing money and investors do not see any return in distant future, For a growing ecom, increased sales means increased losses, still VCs find new startup investment attractive hoping that they will find a “greater fool” and sell equities at profit.
It s proven well that e-commerce market is price sensitive, customer shift bases quickly when they see a cheaper deal, they do not develop emotional bonds with any brand, unless customer support is superb. This e-commerce thing is just a transitory movement and sure we’ll have another stable business model to evolve in near future.